THE dollar has opened higher today as investors buy the currency ahead of a month-end readjustment of portfolios.
At 7am AEST, the dollar was trading at $US0.9002/04, up 0.12 per cent from yesterday's close of $US0.8991/93.
Since5pm AEST yesterday, the domestic dollar traded between $US0.8952 and $US0.9044.
Commonwealth Bank vice-president of institutional banking and markets, Tim Kelleher, said the dollar received support on speculation there would be a large order for the currency as investors adjust their asset holdings.
"There is a rumour that five billion of Aussie is going to bought in London for a fix tonight," Mr Kelleher said.
"That has been the big rumour and why the Aussie has outperformed overnight."
Investors reweight their portfolios at the end of the month, quarter and half-year periods for larger-than-expected movements in asset classes.
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The Standard & Poor's 500 index has risen about eight per cent in July, while Australia's benchmark S&P/ASX200 index has risen 6.1 per cent in the month.
"From what I can gather, the month-end flows are selling US dollars and that is the probably the biggest thing," Mr Kelleher said.
"The fund managers readjust all their portfolios at month-end, depending on what equities have done.
"Equities have had a reasonably strong month, so what then happens is they have to adjust their hedges."
Foreign exchange hedges are used as insurance to minimise the exposure of currency volatility.
Mr Kelleher forecast the dollar to trade between $US0.8975 and $US0.9025 during today's Asian session.
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